The Wall Street Journal last week reported that, while franchising growth in the United States has slowed this past year due to the credit crunch, US franchises are growing by leaps and bounds in countries like Brazil, India, China, Central and Eastern Europe.  Stories like these can make you wonder when microfranchise will take off too in these countries. 

As others have noted, microfranchise today is where microfinance was 10 years ago. Many of the hundred or so microfranchises in the world now have yet to demonstrate their potential to reach scale on a financially sustainable basis. Moreover, the development of best practices and a consensus on financial and social performance measurements for benchmarking and evaluating the performance and transparency of microfranchises is lagging far behind that of its cousin, microfinance. Related, the pool of capital available for financing microfranchises is very underdeveloped. Finally, like microfinance of  a decade ago, most microfranchising is taking place under the radar screen of any regulatory authority.

So what is needed to help microfranchise leapfrog the next decade so as to move from the world’s 100 or so existing microfranchise networks, many of which are financially unsustainable, to reach 10,000 microfranchise networks? 
Another way to answer this question is to ask:  what does the microfinance sector now enjoy that the microfranchise sector is missing?  Here are at least four obvious gaps that deserve further research:

1. Lack of a reputable resource center for sharing experiences, conducting and sharing impartial research, setting standards (financial and social) for sound practices in microfranchising, rewarding transparency within microfranchise networks, and establishing benchmarks for evaluating performance of microfranchises  (see, by contrast, roles played by www.cgap.org, www.mixmarket.org,  and the www.microfinancegateway.org  in the microfinance sector);
2. Lack of financially sustainable/investment-ready microfranchise networks capable of attracting socially responsible investors willing to devote sizeable amounts of risk capital to scaling microfranchising;
3. Lack of technology platforms and management information systems that can support supply chain/product management for scaling microfranchises; and
4. Lack of enabling legal and regulatory environments capable of supporting large scale microfranchises (and ensuring appropriate protection of the interests of microfranchisees).

And what if these hurdles were addressed so that microfranchise could leapfrog a decade and move to scale rapidly?  More microentrepreneurs might bridge the gap between micro- and small/medium enterprises, thereby putting a sizeable dent in  the “missing middle.”  And, equally importantly,  more of the working age children of today’s microfinance clients might find a way to put their hard earned educations to work by finding employment opportunities in microfranchises.  In short, microfranchise might hold an important key for helping to “graduate” microentrepreneurs and their children into small business ownership.